Fuel prices nudge up key US inflation index

WASHINGTON: A record spike in fuel prices following the summer’s back-to-back hurricanes drove up a closely watched US inflation measure in September, but the underlying trend remained weak, according to new data yesterday. The new figures come as the Federal Reserve prepares to begin a two-day meeting today, with policymakers widely expected to leave benchmark interest rates untouched but to raise them in December. Disagreements among policymakers about the timing and pace of rate hikes were unlikely to subside in the face of a fresh batch of weak inflation numbers for September. But robust spending figures in the data report pointed to continuing economic expansion. The Personal Consumption Expenditures price index rose 0.4 percent for the month, up two tenths from August and in line with analyst expectations, according to the Commerce Department report.

The increase was driven almost entirely by a 6.8 percent spike in the costs of gasoline, electricity, natural gas and similar energy goods and services-the largest monthly jump in the energy index in more than eight years. But when volatile food and fuel costs are excluded, the “core” PCE index rose only 0.1 percent for the month, the same level now recorded for five months in a row.

On a 12-month basis, the index grew 1.6 percent, up two tenths from August, but the core index held steady at 1.3 percent, the same as in August and no higher than in October 2015.

Core annual PCE has held below the Fed’s two percent target without interruption for more than five years. Commerce Department officials said hurricanes Harvey and Irma affected consumer spending, but they were unable to isolate the effects given how the underlying data were collected. Persistently low inflation has bedeviled policymakers during much of 2017, with Fed chair Janet Yellen describing the low price pressures alternately as a “mystery,” a “surprise” and a “concern.” Meanwhile, personal incomes rose $66.9 billion for the month as post-hurricane consumer spending gained a full percentage point to reach $136 billion, the largest monthly increase since August 2009, on sales of durable goods like cars. — Agencies